Did You Know?

Did you know that October 15th - 21st is National Estate Planning Awareness Week? National Estate Planning Awareness Week was adopted in 2008 to help the public understand what estate planning is and why it is such a vital component of financial wellness. It is estimated that 70% of Americans do not have an estate plan in place and that most overlook estate planning when doing personal financial management. Estate Planning can give you peace of mind by helping to protect you, your loved ones, and your assets. Many people think that estate planning is mainly for the older community or that it’s too complicated or expensive. Here at Khaled Law Firm we have experienced staff who will help guide you through the estate planning process and make you feel comfortable every step of the way. Give us a call today!

Asset Protection Trusts: Getting a Better Understanding

“Planning is bringing the future into the present so that you can do something about it now.” Alan Lakein, American author and Time Management Expert. We plan to go on vacation.  We plan to have dinner with friends.  But when it comes to planning for how we will be taken care of as we advance in age, many of us prefer not to think about it, believing it will somehow all work out.  Unfortunately, when it comes to long term care planning, including finding the appropriate care and figuring out how to pay for it, those who fail to plan are clearly the ones who risk losing the most.

Consider the two scenarios below that contrast the different outcomes of planning early and choosing the “wait and see” approach for long term care.

 THE FACTS

Hank is 72 and Ellen is 69.  They have been retired for several years and have started traveling a few times a year to visit their children and grandchildren who live in nearby states.  During a recent visit, their oldest child asked them whether they had made any plans in the event one of them suddenly got sick. Hank and Ellen had not thought much about this since both of them were in good health.  However, they agreed to seek some advice upon returning home to see what their options were.

 Hank and Ellen own a home that they have lived in since their marriage 45 years ago, and they have checking, savings and CD accounts that total $325,000.  They both worked most of their adult lives, carefully watching their expenses and never spending money on extravagant items they didn’t need.

 

Scenario #1 – Hank and Ellen planning ahead.  Hank and Ellen spoke with an elder law attorney, as they knew they should update their will and their powers of attorney.   While there, they were surprised to learn that they could actually plan now to avoid running out of money in the future should they need long term care either at home or in a facility.  With the help of their elder law attorney, they placed $200,000 and their home into an irrevocable trust and named their children as beneficiaries of the trust.  If needed, their children would be able to take a distribution from the irrevocable trust rather than using their own money for Hank and Ellen’s needs.

 The remaining $125,000 would be kept in a revocable trust that Hank and Ellen would use for their living and travel expenses.   Ellen would apply for a long-term care insurance policy to provide further protection for them should her health fail (Hank had applied previously but was denied). The $200,000 placed into the irrevocable trust would not be counted against them after 5 years, should either of them need long term care and the assistance of state benefits to pay for it.

 Unfortunately, six years later Hank had a severe stroke and ended up in a nursing home unable to use his right-side arm or leg.  Ellen tried caring for him at home but was simply unable to.  Ellen went back to see the elder law attorney for help.  Because they had planned ahead and had set up an irrevocable trust, Ellen was able to keep all of the remaining cash assets in their revocable trust, and Hank was able to qualify immediately for state Medicaid benefits.  The irrevocable trust (which had now grown to $215,000) remained in place but did not count against Hank since more than 5 years had passed and neither Hank nor Ellen had any direct access to the trust assets. 

Ellen was incredibly relieved to know that she did not have to worry about paying for Hank’s care and could instead focus on visiting him and providing as much support as possible to him.  Although Ellen was not able to obtain long term care insurance, she has piece of mind knowing their children continue to manage the irrevocable trust and are ready to help both Ellen and Hank as needed.

 Scenario #2 – Hank and Ellen without planning ahead.  Let’s assume Hank and Ellen did not plan ahead.  When Hank had a stroke at age 78, the couple had $300,000 in checking, savings and CDs.   Under the Medicaid regulations in place at the time, Ellen was able to keep $110,00 of the assets, but most of the remaining assets had to be used for Hank’s care, leaving only $90,000 that was transferred to the children (or to an irrevocable trust) and thus protected from Medicaid.   While their home would be protected since Ellen was still living there, if she were to become ill the home could be subject to a lien by Medicaid.

 It took nearly two years to get Hank qualified for Medicaid, and the process was incredibly stressful for Ellen and her children.  Furthermore, no planning has been done for Ellen and if her health fails, their remaining assets are at risk.

What If Hank Was Not Married?

Let’s assume Hank was not married but had the same assets.  If Hank planned early, all of the assets he put into an irrevocable trust (including his home) would be protected.  Any assets left outside the trust could be transferred or turned into an income stream to pay for his care, should his health fail and he would need to qualify for Medicaid.  Just as above, the Medicaid application process would go smoothly and quickly.  In addition, an enhanced power of attorney would avoid the need for a guardianship in the event Hank was unable to make the transfers or sign the Medicaid application himself.

 If Hank did not plan ahead, more than half of his liquid assets may have had to be used in order to protect Hank’s home, depending on the Medicaid rules in effect at the time.  This would leave only $50,000 to transfer to the children (or to an irrevocable trust).   And, if Hank did not have capacity to make any transfers or to establish an irrevocable trust, a guardianship proceeding would have to be initiated before any transfers could be made.  Furthermore, the guardianship court would have to grant permission for such transfers to be made.

 FINAL THOUGHTS:

The scenarios above have highlighted the importance of seniors and their loved ones planning early for the possibility of needing long term care. There are not only financial benefits to doing so, but also numerous non-financial benefits, including reduced stress on the family and peace of mind knowing that the family’s needs are taken care of regardless of any health care crisis that may occur. If you think it’s time to discuss how an irrevocable trust could help you and your family to protect your assets, give us a call. We will be glad to schedule an appointment to discuss.

 

VA Benefits subject to a "look back" penalty period

EVER THOUGHT ABOUT APPLYING FOR VA BENEFITS??

 

On September 18, the Veterans Administration (VA) published new rules that make it more difficult to qualify for this important benefit. For example, any gifts that you made in the past 36 months, either to a family member or to an irrevocable trust, would be penalized. Likewise, an investment in an annuity would also be penalized. This means you could be prohibited from qualifying for VA pension benefits for up to 5 years, depending on the amount of the gift.

 

There are other requirements to the new rules, but the above are the most impactful to your case if you still wish to pursue these benefits, which would provide a cash benefit to help defray your cost of care.

 

The good news is, you can still get under the old rules where there is no penalty for making gifts or transferring funds to an irrevocable trust but you have to act quickly. The new rules go into effect on October 18, 2018, and we must have all planning done by that date.

 

If you would like to pursue a VA pension application (or at least get a plan in place) before the new, more restrictive rules go into effect, please contact my office right away.

Rock Hill Paralegal Achieves Advanced Certification

Louise Griffith, paralegal with Khaled Law Firm, has been awarded the prestigious Advanced Certified Paralegal designation by NALA, the Association of Legal Assistants-Paralegals.

Louise is now authorized to use the "ACP" designation. Louise has worked with Khaled Law firm for more than ten years and continues to excel in assisting Julia to create estate plans tailored to each individual's needs and ensure that every person walks away with a plan that suits his or her family.

The Advanced Paralegal Certification program by NALA is a rigorous curriculum-based design presented on the Internet. It emphasizes learning and self discipline in the process of demonstrating mastery of specialized subject matter to earn the certification. The ACP program is the culmination of three years of study and development by attorneys, educators, and paralegals working with subject matter experts as well as with specialists in self-paced learning and testing protocols. 

NALA is the leading professional association for paralegals in the US, with more than 6,000 individual members, and representing more than 12,000 others through local and regional affiliated paralegal associations.

 

Khaled Law Gets a New Office!

Khaled Law Firm Announces Its Move to 1430 Ebenezer Road

Rock Hill, South Carolina, March 29, 2016 – Khaled Law Firm announces its move to 1430 Ebenezer Road, Suite 104, Rock Hill, South Carolina.

“We have greatly enjoyed all of our years in the 1373 office, and we are looking forward to this exciting new phase in the scope of our organization.  This move to an updated, modern office space will enable us to better serve the planning needs of our clients and focus on working with clients on the appropriate estate planning measures to prevent future probate litigation,” says Julia Khaled, owner of Khaled Law Firm.

Khaled Law Firm takes a holistic approach to organizing and simplifying their client’s goals and objectives.  At Khaled Law Firm, team members are dedicated to working in their client’s best interests and they are committed to maintaining open communication with their clients at all times.  They strive to deliver quality service to develop trust and to use their knowledge and experience to provide proactive, high-level service that suits their clients needs.

ABOUT KHALED LAW FIRM

Founded in 2006, Khaled Law Firm is a comprehensive estate planning firm based in Rock Hill, South Carolina, and serving the needs of upstate South Carolina residents.  The firm takes a holistic approach to organizing and simplifying client’s estate planning goals and objectives.  Employing a highly customized process, the firm aims to thoroughly understand the complexities of each client’s unique situation and how all of the pieces fit together.  The firm is founded on three core principles: 1) Maintaining honest, transparent, and open communication; 2) providing proactive, high-level client service; and 3) Consistently delivering advice that is proactive and geared to meet each individual clients’ specific needs.

8 Reasons to Revise Your Estate Plan Today

Many of our long-term clients have worked with us to prepare a Will or Trust that suits their family's needs. However, even if you have completed your Estate Plan, you may need to revisit your plan over time. This Forbes article outlines some of the reasons you may wish to update your Estate Plan:

http://www.forbes.com/sites/markeghrari/2016/01/28/8-reasons-to-revise-your-estate-plan-today/#54942d1430d9

Tips to Avoid an Income Tax and Estate Planning Time Bomb

Fox61.com: Tips to Avoid an Income Tax and Estate Planning Time Bomb

This article discusses one tax consequence you may face if you attempt to do your own estate and long-term care planning. Unfortunately, far too many customers come to our office facing this very circumstance. The best way to get out of this problem is to enlist the help of an estate planning and long term care expert, so that you never get into it.

Congress Gives an Early Christmas Present: Charitable IRA Rollover

By: Stephen C. Hartnett, J.D., LL.M., Associate Director of Education, American Academy of Estate Planning Attorneys

Congress gave us an early Christmas present by passing permanent Charitable IRA rollover legislation, the Protecting Americans from Tax Hikes (PATH) Act of 2015. In the past, Congress would pass such legislation, but it would only be effective for that year. Typically, Congress would pass the legislation just before the holidays, and it would be effective only through the end of the year. So, taxpayers would need to scramble to take advantage of the “gift.” This time, Congress made it applicable for 2015 and all future years.

How does it work?

With the Charitable Rollover IRA, a taxpayer may make a contribution to a public charity directly from their IRA (or Roth IRA). (A 401k or other retirement plan is not eligible unless it is first rolled into an IRA.) The taxpayer must be at least age 70 ½ at the date of the contribution. The contribution may not exceed $100,000 and is made directly by the custodian to the charity.

Why is this better?

Without the legislation, the taxpayer first would need to recognize the income of the IRA and then would have to qualify for the charitable deduction. That could have several problems:

  • The taxpayer may not be itemizing, so may not be benefitting from charitable deductions
  • The taxpayer may have high income resulting in a haircut of itemized deductions
  • Recognizing the income from the IRA may push the taxpayer into higher income tax brackets or the 3.8% surcharge under the Affordable Care Act

With the legislation, it is quite simple. The taxpayer (who is over age 70 ½) simply directs the custodian to make the charitable contribution. The portion of the IRA so contributed (up to $100,000) never comes into income (nor is there a deduction, of course).

Happy Holidays!!

I hope all of you have a wonderful holiday season. If you are travelling to see loved ones, I hope your travels are safe and easy.

Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com